Johnson Amendment Saved, For Now

December 15, 2017 Andy Segedin and Mark Hrywna

Repeal of the Johnson Amendment is off the table in tax reform negotiations after the Senate parliamentarian yesterday ruled it violates the Byrd rule.

The Johnson Amendment prohibits 501(c)(3) organizations from engaging in partisan politics, such as specifically endorsing candidates, or risk losing tax-exempt status. It was authored by then Sen. Lyndon Baines Johnson in 1954.

The Byrd Rule limits reconciliation provisions to those affecting revenue, spending, or deficit reduction. Tax reform has entered the reconciliation phase to iron out differences in legislation passed by the House and Senate. The House bill included repeal of the Johnson Amendment while the Senate version kept the amendment intact. Details of the conference report are expected to be released on Monday, according to David Thompson, vice president of public policy for the National Council of Nonprofits.

The Byrd rule states that if something violates this, it gets stripped from the bill, Thompson said. “If it’s a policy issue that ordinarily would be under regular order, you can’t do it in reconciliation,” he said, adding that the parliamentarian is the only one who can make that ruling. Proponents of repeal had argued that it’s a revenue issue. A motion to waive the Byrd rule would require 60 votes in the Senate, where Republicans currently hold a 52-48 advantage.

The nonpartisan Joint Committee on Taxation (JCT) estimated that some $1.2 billion in donations to campaign and candidate committees each year could shift to nonprofits. Donations to political committees are not tax-deductible but giving to charities is, which would mean less revenue for the Treasury. Just because there’s a cost doesn’t trigger a revenue or spending provision, Thompson said.

Because of the “intensity of a very small of minority of people pushing” for repeal of the Johnson Amendment, Thompson expects efforts to slip it in “everywhere and anywhere,” including the appropriations process. An omnibus bill, expected next week, has language blocking enforcement of the Johnson Amendment against churches, he added. “I fully expect that language, or something like it, to show up in appropriations,” he said.

Sen. James Lankford (R-Okla.) was disappointed in the parliamentarian’s ruling. “The federal government and IRS should never have the ability, through our tax code, to limit free speech; this tax reform bill was an appropriate place to address this historic tax problem,” he said. Lankford introduced separate legislation (S. 264) this past February to repeal the Johnson Amendment, in addition to a bill (S. 2123) last month that would create a Universal Charitable Deduction.

Repeal would not have changed the law regarding political campaign financing through charities, according to Lankford. “Nonprofits are allowed to lobby Congress or their local elected officials, but the ambiguity of the current tax code keeps nonprofits in constant fear that they might have crossed a line that no other organizations has to consider,” he added.

Lankford most likely won’t appeal the ruling in the tax bill, according to a Capitol Hill source, but could pursue the stand-alone bill next year and is willing to discuss tweaks to win Democratic support. In the House, Rep. Walter Jones (R-N.C.) introduced a bill in January that would repeal the Johnson Amendment.

“Lankford went to the mat, pushing to the very end,” Thompson said. “This is an issue in his mind that is nothing but a speech issue. All of us affected by this legislation believe it’s not a speech issue at all,” he said.

The National Council of Nonprofits has been pushing hard to keep the Johnson Amendment, getting more than 5,600 charities, nonprofits, foundations and houses of worship to sign on in support.

“None of us have unfettered speech,” Thompson said. Organizations and churches are allowed to talk about issues, even specific legislation, but endorsing candidates is a clear violation, he said. “This is the only bright line we’ve got,” Thompson said. “Did I endorse a candidate? That’s not vague. Did I bring a candidate in to preach but not others? That’s some pretty clear favoritism. Reasonable people understand this. People who want to endorse candidates are making stuff up to scare people.”